arm strong economics evolution of us dollar 011712

8/3/2019 Arm Strong Economics Evolution of Us Dollar 011712

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We will be holding three World Economic Conferences this year. These will be substantially

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limited to 100 attendees. Because of the overwhelming response, the room was full to capacity

at 300+. That prohibited Mr. Armstrong from mingling with the crowd at the cocktail party and

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please send your email to reserve a seat to:


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Copyright January 17th, 2012

HE EVOLUTION of the United States dollar has been one of the most misunderstood

issues of all time. There has been far more at stake in the Rise & Fall of the dollar than

meets the eye. This is not an issue of Intangible v Tangible (Paper v Gold). This is the core

issue of the migration of the Financial Capital of the World that has taken place through

time and circumstance. The rise of the dollar represented the Decline & Fall of Europe.

The Decline & Fall of the Dollar today, represents the collapse of Western Society for the one thing that

destroys a nation has been its debt and fiscal mismanagement. Until the day comes when the people

remain diligent to temper and control their various forms of government, there is just no hope in sight.

The Financial Capital of the World has migrated perpetually because of fiscal mismanagement we the

Sovereign Debt Crisis today is merely a manifestation of the past in an endless loop of reruns. What lies

in wait just ahead is the classical conclusion of Machiavelli history repeats because mans passions

never change.


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Of

course there is the epic Fall of Rome in 476AD with the last Roman Emperor to hold the throne in the

West being Romulus Augustus (475-476AD) a most fitting name since Rome was founded by Romulus

and the first Roman Emperor was Octavian who was bequeathed the name Augustus (27BC-13AD)

meaning father of his country. The fall of Rome ushered in the Dark Age for Europe. Nonetheless, its

eastern half with the capitol of Constantinople in

modern Istanbul continued into 1453. Its fall shifted the

Financial Capital of the World to India.

During the Byzantine reign of Constans II (641-668AD),

the Muslim hoards were rising taking both Egypt and

Rhodes. In the north, the Slavs were also presenting a

threat. The frontiers of the Byzantine Empire were now

being contested. Constans II relocated his administration

to Sicily at Syracuse. When he sent for his family, the

senate refused to let them leave fearing he was in fact relocating the capital of the empire and the

solution was his assassination. By 1092, gold had vanished as

the Muslims cut off access to Numidian gold mines. The

emperor bore the illustrious name Constantine XI (1448-

1453). He died in battle defending the walls against the

Muslin invasion.

While the Muslim invasion saw the end of the Byzantine

Empire, it had also set in motion the gradual decline and fall

of India. While Byzantium fell into economic turmoil and


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crisis going into 1092, India had risen to the Financial

Capital of the World. India had been trading with the

Romans going back to the birth of Christ. Not only are

genuine Roman coins discovered in India confirming

the extensive trade, but we also find Indian simulations

(counterfeits) of Roman gold aurei of Septimius

Severus (193-211AD) that also illustrates how Roman

coinage was being used as part of the money supply in

India. This is the same pattern that we see with US

dollars circulation in Russia.

As India became the Financial Capital of the World, we then

find Indian gold coins circulating in Asia as well as in the

Middle East. Indian gold coins tended to be popular in China

when there were no actual gold coins minted by China. China

was living in the shadow of India. It had absorbed its religion

and culture.

India indeedhad peaked

as the Financial Capital of the World during the reign of

Somesvara I (1043-1068AD) due in part to the rise of

the Muslim empire that had begun to carve out its place

in history. While the Muslim world was expanding both

into Europe as well as into Asia, the balance of trade


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began to shift against India. Mahmud of Ghazni

(971-1030AD), was the most prominent ruler of

the Ghaznavid dynasty who reigned from 997AD

until his death in 1030AD in eastern Iran.

Mahmud had turned the former provincial city

of Ghazni into the new wealthy capital of an

extensive empire that included most of Iran,

Afghanistan as well as Pakistan stretching into

North-West India. Mahmud became the first

ruler to carry the title Sultan (meaning

"authority"), to signify the vast scope of his power and empire.

The 21 year-old Sultan el-Fti (the Conqueror) Mehmed II (b:

March 30, 1432, 14511481) captured Constantinople on May 29

1453 and assumed the title of Caesar. As the Ottoman Empire

began to rise India began to decline. That decline, however, was

slow taking the form of steady erosion. Nonetheless, the title of

financial capital of the world not passed to the Ottoman Empire.

Instead it passed to China. By the mid-19th century, it was now

Chinas turn to shine. It was the riches of India and China that

had attracted Britain. With a steady pace, eventually Britain

became Great and captured the crown of Financial Capital of

the World during the Victorian Age from Asia. But alas,

arrogance of officialdom emerged as always and with it fiscal

mismanagement. By 1913, the jealousy of rivals in Europe led to

World War I and with it, the peak in European greatness. The title of Financial Capital The World now

shifted from Europe and Great Britain to the United States.

During the late 15th century a new denomination of money appeared known as the guldengroschen

which was a silver coin of 28.8 grams. Silver discoveries continued and in Bohemia, these silver


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discoveries led to coins known as the "Joachimsthaler" that came from the city of Joachimsthal

(Jchymov). The slang term became "Thaler" the origin of the American dollar where Thalin German

means "valley". Therefore, the word "thaler" was the slang term for a person or a thing " from the

valley" a sort of a hick. Therefore, the word dollarwas the English translation for thaler that no

longer carried the slang meaning. It was now a monetary unit after about 200 years.

Yet the path for the dollar would reflect both the fiscal mismanagement of Britain as well as Spain.

Despite a new world of tremendous wealth, Spain borrowed far more than the next ship was always

carrying. For this reason, Spain became a serial defaulter beginning in 1557 followed by 1570, 1575,

1596, 1607, and 1647 ending in a 3rd world status. Their economic model was one of conquest rather

than constructing a viable economic establishment. The persecuted the Jews and Muslims and that

religious fanaticism led to massive migration of capital and talent. The Jews abandoned Spain and fled to

Amsterdam causing the Dutch to emerge as the initial Financial Capital of Europe. That then shifted to

England when in 1689 they adopted a Dutch King. Britain on the other hand, extracted precious metal

from the American colonies and would only pay copper. These two fiscal mismanagements on the part

of Britain and Spain set the tone for the American Revolution due to the shortage of money in the

colonies. By the 1700s, the Spanish 8 reals were commonly called dollars in America and cutting themup became a piece of eight.

United States dollar was thus the adoption of the German monetary unit thaler that had become

synonymous with the silver coin of about 28 g. Therefore the dollar was actually based upon the Spanish

silver 8 Reales coins commonly called dollars which had become the mainstay of the colonial monetary

system. Such coins were first minted by the Spanish in America during 1530. These early pieces are

known as cob coinage and tended to vary in weight in addition to being struck rather irregularly. The

designs were never fully struck and as such the coinage appeared very crude. Introduction of machine

milled coinage did not take place until 1732 and

thus it is from that period onward that we find

the term milled dollars distinguishing the

standardized products from that of this early

cob coinage. The gold coinage was often

referred to as a doubloon. There is the famous

Brasher Doubloons issued in 1787 by Ephraim

Brasher who was a Dutch gold and silversmith and

jeweler who lived next door to George


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Washington. In 1787, Brasher and John Baily petitioned the New York Assembly for the contract to coin

coppers for the state. A committee of the legislature investigated the matter and recommended that

the matter be postponed indefinitely. Possibly to stimulate interest in his proposed coinage, Brasher

issued his famous gold doubloons. These rare coins are the equivalent to the Spanish doubloon (or 8

escudos piece), weighing approximately 408 grains or 39.4 grams, and, when issued, were worth about

$15 in colonial money.

There had been a great scarcity of coins in the New World, especially in the more remote

areas. The early colonists sometimes used other mediums of exchange, such as bullets,

tobacco, animal skins, and even adopted the Indian monetary system using mussel shells

strung-together into what

would appear to be a

necklace called wampum

composed of polished

beads made from

seashells. Throughout

much of the 17th and 18th

centuries, the exchange

rate for white wampum

was 360 beads = 5

shillings and 6 beads = 1

penny. Even tuition at

Harvard University was

payable in wampum as

was transportation costs

such as the passage on

the Brooklyn Ferry.

Wampum became less

important for barter;

however it was not until around 1890 that the last wampum mill shut down.

In the Americas, there was clearly the

dominance of Spanish coinage and the absence

of English silver or gold coinage that provided

the incentive for the establishment of paper

money. Here is a Massacushets Bay note from

1690.

These Spanish silver milled dollars were also

known also as Pillar Dollars based upon the

design showing two worlds the old and the

new. They were minted between 1732 and 1771

with a weight of 26.8 grams.


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The term Piece of Eight refers to the fact that these coins were often cut into pieces to make small

change. These pieces were called a bit representing 12.5 cents and thus 8 bits was equal to 8 shillings

which equaled a pound. By the time the US dollar was created in 1794, "two bits" was equal to 25 cents

(quarter dollar). Here we have two bits stamped Saint Lucia Island declaring this to be a valid coin of the

colony.

These bits are common also among the cob coinage. They tend to be referred to also a fleet money

implying their ultimate export to Europe. They are also commonly reffrered to as pirate money since

this is the booting seized from a treasurr ship.

The Act of April 2, 1792, which established the U.S. Mint, authorized the production of the United States

Silver Dollar .8924 fine silver with a weight of 416 grains or 26.9563 grams. A troy ounce weighs 480

grains and thus the silver dollar began with a gross weight of .866 of an ounce with a fine silver weight

of only .773 of a troy ounce. The United States continued to mint silver dollars until 1804. Britain had

stopped striking gold coinage in 1797 and did not resume until 1813 after the Napoleonic War. It was


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during this period in time that Britain was counter-

stamping Spanish silver dollars and this in 1804 it

began to over-strike these coins with British designs.

The United States did not resume striking silver

dollars until 1837.

By 1853, the value of a United States Silver Dollar

had contained in gold terms, $1.07 of silver. With the

Mint Act of 1853, all US Silver coins, except for the

US Silver Dollar and new 3 cent coin were reduced by

6.9% as of weight with arrows on the date to denote

reduction. The US Silver Dollar continued to be minted in very small numbers mainly as a foreign trade

with the Orient.

There was to be absolutely political meddling

in finance under Andrew Jackson (1757-1845;President 1829-1837), who note merely

began the Bank War, but created the Panic of

1837. Jackson was intent upon destroying the

Bank of the United States and did quite a nice

job of it that he set the stage for the Great

Panic of 1837. Jackson has decentralized

banking and encourages massive widespread

fraud whereby private banks issued their own

currency. There was no Federal paper

currency until the Civil War in 1861. This is

the period known as the Broken Banknote

and Wildcat Banking era for there are numerous state banks that all issued their currency and

defaulted on a massive scale. This idea that banks issue paper money ironically stems from this whole

idea that money is tangible. The idea that a bank issues its own currency backed by its own reserves was

the cornerstone of banking. It was to be a place of safe keeping that was it. Not a lender of your

money.


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The United States government issued no paper currency until the Civil War. Financing the Civil War was

accomplished with paper currency just as Britain had ceased the production of gold coins resorting to

paper during the Napoleonic War. There were demand notes that simply promised to pay in coin

eventually as was the case with the Continental Currency. However, there were interest bearing notes

as well as compound interest bearing notes. This provided a form of circulating bonds.


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There were also Gold Certificates, which were quite rare. Clearly, the term Greenback became thename of notes that neither were backed by gold nor paid interest as a

hybrid bond. Thus, the term Greenback referred purely to the lack

of anything on the reverse but green ink. Here we also see a $5

Louisiana note that also paid interest and note the coupons attached

to the right side.

In 1863, to encourage the sale of government bonds, the government

created the National Banking Act. Individual banks could issue their

own currency according to standardized federal designs up to 90% of their holdings of federal bonds.

Thus, they were monetizing the debt in a very clever manner as illustrated here.

The idea that a bank issues the notes was

clearly nothing new. This was the very idea from

which this whole tangible idea emerges. A bank

held assets and monetized those assets by

issuing currency that reflected the tangible

assets held by the bank be it gold, or in this

case, bonds. Currently, the entire monetary

system is still based upon this concept where

central banks hold reserves of US dollars, but

they are in the form of bonds, not actually

paper currency. In truth, MONEY has become

really bonds that the government pretends is

not MONEY but in fact they represent reserves

in the same manner as these National Bank

Notes that began in 1863.


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Just in time for the Panic of 1869 when Jim Fisk sought to force the price of gold higher on the New York

Stock Exchange where Greenbacks then traded, we have the Legal Tender issue of currency, which was

also not backed by gold or interest baring. However, because of the Panic of 1869, we begin to see Gold

Bank notes emerging in California during 1870.


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Of course the whole Panic of 1869 was about pushing gold higher and the idea was that when the

United States would have to return to the Gold Standard, it would have to accept whatever price it was

trading at on the market at that moment in time. James Fisk (1835-

1872) and Jay Gould (1836-

1892) managed to get gold

to rally up to $162 and

ounce on September 24th,

1869. This was the financial

panic where bankers werebeing dragged out to the

streets and hung and they

had to send in troops to

suppress the panic, which

gave rise to the term Black

Friday.

arm strong economics evolution of us dollar 011712

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